Progress on the €1.84m project was welcomed by Donal O'Sullivan, President of the Arklow & District Chamber of Commerce.
Wicklow County Council will now commence works on the collector main at Ballyduff to bring the water pipes to the treatment plant.
The council has yet to receive written confirmation of the funding but has assured the Arklow Chamber that work will commence in the next few weeks.
Environment Minister John Gormley said the funding now allows Wicklow County Council to complete the contract formalities with the successful tenderor.
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The Arklow Water Supply Scheme comprises of three phases.
Phase 1 comprised the development of groundwork production wells and is already complete.
Phase 2 comprises the construction and distribution mains and the provision of a new water treatment plant at Ballyduff.
Phase 3 of the scheme will provide additional groundwater sources needed to meet the estimated water demand in Arklow for the next 20 years.
Chamber president Mr O'Sullivan said: "This is indeed great news for Arklow, the development of this part of Phase 2 in the water supply scheme will ensure that construction of these pipelines will provide a good quality and reliable drinking water supply to the people of Arklow.
"Arklow has been badly let down over the past number of years and this new water scheme is long, long overdue."
Mr O'Sullivan said he hoped Wicklow County Council would be speedy in its response to the funding, and that the work would commence on Phase 2 as soon as possible.
(PR/BMcC)
